October 2011

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Summary:

Hedge funds have regained the trust of institutional investors. The total value invested in hedge funds is back to the level of September 2008, just before the height of the economic crisis. Because of the influx of institutional assets, hedge fund managers (HFMs) are subject to enhanced due diligence requirements, but there is also greater demand for comparability of HFMs’ performance figures. Not surprisingly, HFMs have been turning to the GIPS standards as a way to achieve the transparency being demanded in the post-Madoff marketplace. However, HFMs encountered a number of practical issues when trying to apply the GIPS standards to hedge funds.